Inward Worker Remittances and Economic Growth: The Case of Bangladesh
Keywords:worker remittances, economic growth, Bangladesh, ARDL bounds testing
It is commonly believed that for development economies, inward worker remittances are an important financial instrument to boost economic growth. This study investigates the relationship between inward worker remittances and economic growth for the case of Bangladesh. The study applies an Autoregressive Distributed Lags (ARDL) bounds testing approach based on 28 years of World Bank and IMF data. The paper adds to the literature by considering Foreign Direct Investment (FDI) and Official Development Aid as additional foreign sources of economic growth. In contrast to common belief and most prior results, the findings of this study indicate that worker remittances do not have a significant impact on economic growth. Rather, economic growth is mainly spurred by changes in Bangladesh’s capital stock and by FDI inflows. Thus, while worker remittances are certainly important for receiving families, their impact on economic growth needs to be enhanced by incentivizing a more growth-conducive use of remitted funds.
Akther, M., Masuduzzaman, M., & Chakraborty, S. (2017). Quarterly report on remittance inflows. Dhaka: Research Department External Economics Division, Bangladesh Bank.
Al-Assaf, G., & Al-Malki, A. M. (2014). Modeling the macroeconomic determinants of workers’ remittances: The case of Jordan. International Journal of Economics and Financial Issues, 4(3), 514–526.
Altintas, H., & Taban, S. (2011). Twin deficit problem and Feldstein-Horioka hypothesis in Turkey: ARDL bound approach and investigation of causality. International Research Journal of Finance and Economics, 74, 30-45.
Barai, M. K. (2012a). Development dynamics of remittances in Bangladesh. SAGE Open, 2(1), 1–13.
Barai, M. K. (2012b). Socioeconomic impacts of remittances: A comparative study of Bangladesh and Vietnam. Asia Pacific World, 3(1), 110–139.
Barba Navaretti, G., & Venables, A.J. (2004), Multinational firms in the world economy. Princeton: Princeton University Press.
Carrasco, E., & Ro, J. (2007). Remittances and development, mimeo. Retrieved from http://www.uiowa.edu.
Cazachevici, A., Havranek, T., & Horvath, R. (2020). Remittances and economic growth: A meta-analysis. World Development, 134(8), 105-121.
Chami R., Fullenkamp C., & Jahjah S. (2003). Are immigrant remittance flows a source of capital for development? (IMF Working Paper 03/189). Washington, DC: International Monetary Fund.
Chowdhury, M. B. (2011). Remittances flow and financial development in Bangladesh. Economic Modelling, 28(6), 2600-2608.
Coly, S. M., & Mendy, P. (2020), Exploring the nexus between migrant remittances and economic growth: A study of Senegal. Global Journal of Human-Social Science: Economics, 20(4), 1-14.
Das, A., McFarlane, A., & Jung, Y. C. (2019). Remittances and GDP in Jamaica: An ARDL bounds testing approach to cointegration. International Economic Journal, 33(2), 365–381.
Dhaka Tribune. (2018, December 10). World Bank: Bangladesh ninth in remittances with $15.9bn. Retrieved from https://www.dhakatribune.com/business/2018/12/10/world-bank-bangladesh-ninth-in-remittances-with-15-9bn
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427–431.
Hussain, Z. (2014, August 7). The Bangladesh Remittance Story Reaffirmed. World Bank Blogs. Retrieved from https://blogs.worldbank.org/endpovertyinsouthasia/bangladesh-remittance-story-reaffirmed
IMF. (2017). IMF investment and capital stock dataset. Retrieved from https://data.imf.org/
Jawaid, S. T., & Raza, S. A. (2012). Workers' remittances and economic growth in China and Korea: An empirical analysis. Journal of Chinese Economic and Foreign Trade Studies, 5(3), 185–193.
Kanewar, K. (2018). Imports, remittances, direct foreign investment and economic growth in Republic of the Fiji Islands : An empirical analysis using ARDL approach. Kasetsart Journal of Social Sciences, 39(3), 439–447.
Karagöz, K. (2009). Workers’ remittances and economic growth: Evidence from Turkey. Journal of Yasar University, 4(13), 1891-1908.
Kripfganz, S., & Schneider, D. C. (2018). ardl: Estimating autoregressive distributed lag and equilibrium correction models. Paper presented at the London Stata Conference, London.
Kumar, R. R., & Stauvermann, P. J. (2014). Exploring the nexus between remittances and economic growth: a study of Bangladesh. International Review of Economics, 61(4), 399–415.
Maddala, G.S., & Kim, I. M. (1998). Unit roots, cointegration and structural change. Oxford: Oxford University Press.
Majumder, C. (2016). Relationship between remittance and economic growth in Bangladesh: An autoregressive distributed lag model (ARDL). European Researcher, 104(3), 156–167.
Migration News. (2019, April 10). Remittances showed a rise of 15 percent in Bangladesh in 2018. Retrieved from https://migrationnewsbd.com/news/view/32086/21/Remittances-showed-a-rise-of-15-percent-in-Bangladesh-in-2018
Narayan, P.K. (2005). The saving and investment nexus for China: Evidence from co-integration tests. Applied Economics, 37(17), 1979–1990.
Nath, H. K., & Mamun, K. A. (2012). Workers’ migration and remittances in Bangladesh. SSRN Electronic Journal, 27(1), 29-52.
New Age. (2019, April 10). Bangladesh remains 9th highest remittance receiver. Retrieved from http://www.newagebd.net/article/69606/bangladesh-remains-9th-highest-remittance-Receiver-wb
Olayungbo, D. O., & Quadri, A. (2019). Remittances, financial development and economic growth in sub-Saharan African countries: Evidence from a PMG-ARDL Approach. Financial Innovation, 5(9), 1-25.
Paul, B. P., & Das, A. (2011). The remittance-GDP relationship in the liberalized regime of Bangladesh: Cointegration and innovation accounting. Theoretical and Applied Economics, 18(9), 41-60.
Parveen, F., Masuduzzaman, M., Islam, S., & Dipty, S. I. (2019). Inflow of remittances and its impact on economic growth of Bangladesh. Australian Academy of Business and Economics Review, 5(2), 74–88.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.
Philips, A. Q. (2018). Have your cake and eat it too? Cointegration and dynamic inference from Autoregressive Distributed Lag models. American Journal of Political Science, 62(1), 230–244.
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346.
Raihan, S., Uddin, M., & Sakil, A. (2021). Impact of foreign remittances on the household spending behaviour in Bangladesh. Migration and Development, DOI: 10.1080/21632324.2020.1870835.
Salahuddin, M., & Gow, J. (2015). The relationship between economic growth and remittances in the presence of cross-sectional dependence. The Journal of Developing Areas, 49(1), 207–221.
Salma, U. (2019). Nexus between remittances, FDI and economic growth of Nepal and Bangladesh: An ARDL bound test approach. IOSR Journal of Economics and Finance, 10(4), 7-16.
Sarker, M., & Islam, S. (2018). Impacts of international migration on socio-economic development in Bangladesh. European Review of Applied Sociology, 11(16), 27–35.
Shimul, S. N. (2013). Remittance and economic development: Evidence from Bangladesh using unrestricted error correction model and Engle-Granger cointegration approach. Business and Economic Horizons, 9(1), 15–21.
Sinha, R. (2017). Long-term growth scenarios for Bangladesh (Policy Research Working Paper No.7952). Washington, DC: World Bank.
Song, F., Hooper, L., & Loke, Y. K. (2012). Publication bias: What is it? How do we measure it? How do we avoid it? Open Access Journal of Clinical Trials, 5(1), 71–81.
Sutradhar, S. R. (2020). The impact or remittances on economic growth in Bangladesh, India, Pakistan and Sri Lanka. International Journal of Economic Policy Studies, 14(3), 275-295.
The Daily Star. (2018, January 2). Remittance inflow of Bangladesh in 2017 slumps to six-year low. Retrieved from https://www.thedailystar.net/business/remittance-inflow-of-bangladesh-in-2017-slumps-to-six-year-low
Valickova, P., Havranek, T., & Horvath, R. (2015). Financial development and economic growth: A meta-analysis. Journal of Economic Surveys, 29(3), 506–526.
World Bank. (2018, April 8). Record high remittances sent globally in 2018. World Bank Press Release. Retrieved from https://www.worldbank.org/en/news/press-release/2019/04/08/record-high-remittances-sent-globally-in-2018
World Bank. (2019). Migration and movement: Recent developments and outlook. Migration and Development Brief, 31, 1-29.
How to Cite
Submission of a manuscript to Applied Economics Journal will be taken to imply that the author(s) guarantee that the paper is an original work, has not been published, and is not being considered for publication elsewhere either in printed or electronic form. The author(s) have obtained permission from the copyright holder to reproduce in the article material not owned by them, that author(s) have acknowledged the source, and that this article contains no violation of any existing copyright or other third party right or any material of an obscene, indecent, libelous or otherwise unlawful nature and that the article does not infringe the rights of others. The author(s) will indemnify and keep indemnified the editors and Applied Economics Journal, Center for Applied Economics Research (CAER), Faculty of Economics, Kasetsart University against all claims and expenses. The author(s) agree that the publisher may arrange for the article to be published and sold or distributed on its own, or with other related materials, and could reproduce and/or distribute in printed, electronic or any other medium whether now known or hereafter devised, in all languages, and to authorize third parties to do the same.